It is an important and prominent fact about the three golden rules of accounting the ability to convert the complexity of bookkeeping rules into an easy-to-understand set of rules. No matter how well organised is your system to keep the records and track of everything related to top accounts, it is still imperative to be able to have an understanding of accounting records to an extent that you can communicate this to a wide range of audiences effectively.

Here comes the role of three golden rules of accounting which will help your accountant to communicate his plan of action to the public in a justifiable manner. This will be defined by the standard set of rules related to accounting. The owners of the businesses are also supposed to have an understanding of accounting. So that they are in a better position to understand what is the plan of action by their accountants and how can it affect their business growth and valuation.

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The 3 Golden Rules of Accounting

If you are a little familiar with the field of accounting, you would know that there is a standard set of rules of accounting that is required to be followed while business accountants aim to accomplish their roles in doing their tasks and duties. Such a set of rules may sound easy at first but later you will realise the level of complexity.

This stage will come while you are dealing with multiple accounts and the relevant accounts. It is tricky part to give an explanation of these principles to the client and another part of the audience. The three golden rules of accounting can be of help here and they are listed and explained below:

1- Nominal Account – Debit All Expenses and Losses and Credit All Income and Gain

This is normal for a business to struggle with the roller coaster of losses and gains in the growth journey. You are liable to keep track and maintain a record of all such business activities. For this purpose, you will have to keep these things in the nominal account. In the case a business is going through losses, there is a requirement of debiting this in the business bookkeeping. When the business is in the position of getting the gains and income, you will be in need to credit this part on the details of records.

2- Personal Account – Debit the Receiver, Credit the Giver

If you are a person who is keeping business dealings, a personal account is a very useful way to do it. In the case of receiving, all the details will be a part of the personal account as a record that will show what have you received. In the business books, we use the term receiver for this as well. This will be on the side of debit in the business books. This explains that you must use the receiver’s account to debit and if you want to use the account for credit, you will use the personal account of the giver.

3- Real Account  – Debit What Comes In and Credit What Goes Out

The real accounts are related to the property activities. The property may seem to come in as a purchase or sell out as an outgoing business activity. For the products related to property that is coming into the business, records will need a real account of the maintenance of the records. In the business books, this will have the debit side. On the other hand, the outgoing business activity related to the property will be a part of the credit side of the accounts.

The Bottom Line

Now that you have gathered a fair amount of information about the golden rules of accounting, we can say that the three golden rules of accounting are helpful to keep the records of different business activities manageable. However, your accountants need to have a clear understanding of how you can go about the details and keep the records for productive use. We hope these few minutes of reading have helped you to develop a better understanding.

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Disclaimer: The information about the golden rules of accounting provided in this blog includes text and graphics of general nature. It does not intend to disregard any of the professional advice.